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Morgan Stanley will continue overseeing Luzerne County’s employee pension fund, which is currently valued at approximately $291 million, the county Retirement Board decided Wednesday.
The board had voted in January to publicly seek requests from entities interested in serving as advisor because Morgan Stanley’s current contract is expiring.
Two other companies had submitted proposals — PNC Institutional Management and Conrad Siegel.
Board Vice Chairman Brian Thornton, a county councilman, said Morgan Stanley proposed the lowest fee, and board members agreed it has provided very good service to the county.
The new three-year agreement will start May 1, with options for two additional one-year renewals, Thornton said.
Board member Romilda Crocamo, the county’s acting manager, said the team managing the fund is local, but it has access to broad investment resources because Morgan Stanley is a global company.
“I think they’ve performed well for the county over the years. They’ve been very responsive to our inquiries,” Crocamo said.
Morgan Stanley has been overseeing the fund since October 2008. The board publicly sought proposals from other companies in 2011 and 2015 and chose to keep Morgan Stanley both times.
Morgan Stanley representative Richard Hazzouri said the company agreed to reduce its fee from 0.12% of the assets under advisement to a new 0.10%.
“We’re obviously thrilled with the retirement board’s decision and look forward to continuing to work with the board on behalf of the county employees and retirees,” Hazzouri said.
The fund reached a record high value of $311 million at the end of 2021, with net investment earnings of $31 million for the year, which equates to 11%, Hazzouri has said.
This year through March, the fund had $4.6 million in net reductions and $15.4 million in investment losses, decreasing the estimated value to $291 million, he reported to the board Wednesday. That amounts to a year-to-date return of -4.98%.
However, Hazzouri stressed these figures are preliminary and expected to improve. Morgan Stanley has not yet received final first-quarter returns from alternative and private equity/credit investments that should positively impact the fund’s status, he said.
The county is still faring better than many because global equities were down 5.5% and bonds were nearly -6% for the period, Hazzouri said.
“I’m pleased the fund held up in a very challenging market, but I’m not happy when a client’s portfolio is down,” he said.
With the county’s public fund, the goal is maximizing returns without exposing it to undue risk — all while making sure enough cash is always available to cover ongoing pensions, Hazzouri reiterated. The fund must pay approximately $20 million in pension benefits to retirees annually.
Taxpayer subsidies have been required since 2002, when investment earnings and employee contributions stopped keeping pace with obligations for future pensions that are guaranteed by law.
This year’s taxpayer subsidy is budgeted at $14 million, with $10.8 million from the general fund and the rest covered by other funding, officials have said.
Serving on the retirement board, in addition to Thornton and Crocamo, are county Budget/Finance Division Head Brian Swetz, employee/retiree representative John Evanchick Jr. and county Council member Kendra Radle, who serves as board chair.
Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.